Posts tagged 'Steel'

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

We joke, we joke. A little. Deutsche had of course already joined the commodities-supercycle-is-dead chorus, and this note is not from the commodities side but by Asia chief economists Taimur Baig and Jun Ma. Read more

It was supposed to be one of the best trades of 2013 – buy mining stocks to get leveraged upside to the global economic turnaround. But as we approach the end of the first quarter, only one half of that equation is working. The world economy is recovering strongly but the big miners are being well and truly left behind – Australian Financial Review.

Yep, the miners as a ‘leveraged play on global growth” is not going exactly to plan: Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

After languishing well below $100 for much of August and September, spot iron ore is back in the $110+ range and not far from the $120 ‘floor’, albeit with a few hiccups of the last couple of days… So what’s going on? Here’s a theory we find plausible. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

It’s not a great choice, if you’re in China. From Reuters today is confirmation that Baosteel has suspended production at a Shanghai plant that has capacity to make 3m tonnes a year of steel.

“The government’s infrastructure investment may only improve sentiment … I don’t expect a big lift in steel demand,” Zhang Dianbo, assistant president of Baosteel, told reporters at an industry conference in Dalian on Thursday. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

“The whole steel market has already collapsed in August, because any steel maker, including Baosteel (600019.SH), would make a loss at a such [low] price levels,” Wu Xichun, the honorary chairman of the China Iron & Steel Association, told a weekend conference. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Has the pain really started for those suppliers for whom China’s steel mills are the big growth prospect? Iron ore prices have plunged in the last few weeks, but they are still at historically strong levels and well above those of 2009.

The breaking of the iron ore cost curve suggests that the marginal iron ore producers (who are mostly Chinese) have either dropped out or are making some kind of centrally-commanded loss. But the signs of steel downturn-related suffering outside of China are so far mostly limited to Vale’s ill-timed super-giant Valemax ships, and Fortescue Metals Group, with its combination of large debt burden and high breakeven point relative to its Australian peers. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

It used to be an accepted fact that China’s appetite for steel and steel’s main ingredients — primarily coking coal and iron ore — would continue to rise sharply, not just in absolute terms but at an accelerated pace.

Annual steel consumption had been expected to rise from 2011′s 680m-plus metric tonnes to 1bn metric tonnes by 2020. This forecast has been a mainstay of many China-related predictions for some time, particularly in the mining sector. It was still being cited by BHP Billiton in March, even while the miner’s head of iron ore surprised many with a bearish tone. Since then, however, the world’s two biggest miners began to back away from it and this month Rio Tinto is talking about 1bn tonnes of steel by 2030 — a hazily far-off date. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Nomura’s Matthew Cross and Ivan Lee have produced this chart to underline their argument that one should look to steel profits rather than the iron ore cost curve to predict near-term iron ore prices moves. Which we’d characterise as: it’s problematic to look only at the supply-side in forecasting commodities prices. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

We related last week a forecast from Nomura that iron ore was going to keep falling, and probably more steeply, as it tends to follow Shanghai rebar futures (the most-traded steel futures) and those have plummeted of late. It looks like spot iron ore prices are indeed catching up (or down) with rebar, and that’s taken iron ore below the critical $120/tonne mark.

Why is $120 important? Because of the cost curve. This comes up a lot in the world of iron ore, so it might be worth revisiting what that means. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Having just looked at the prospect of a flat (at best) steel consumption growth rate from China, the next question for many will be: what does this mean for iron ore? Because pretty much all of the projected increase in iron ore demand is expected to come from China:

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Even if you don’t buy the once-popular assertion that China needs more of just about everything to meet its growing economy, zero growth in steel consumption might seem pessimistic, given that rural Chinese are still moving to cities in large numbers.

Nomura analysts Matthew Cross and Ivan Lee looked at China’s urbanisation rate and concluded that it can keep progressing at its current pace for years without needing an increased rate of steel consumption. In fact, they argue that China’s annual steel needs won’t increase at all in 2012 and 2013 — and that’s with new government stimulus. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Something is up with China’s steel production. It reached record levels in March, driving up expectations of rising coking coal and iron ore prices. As the FT and Reuters have reported, there are accounts of both thermal coal and iron ore shipments being deferred or even defaulted on, and prices of both commodities have fallen 12 per cent since the beginning of April. To an extent, China’s steel production growth has also slowed: April’s production only increased 1.9 per cent compared to a year earlier, versus March’s rate of 2.5 per cent compared to a year previous.

So why is China still producing steel at relatively high rates? There are a few theories. Wood Mackenzie says that even very thin margins are enough to keep privately-owned steel mills operating, while the state-owned operators had no incentives to stop production. The research house also says about 58 per cent of Chinese steel is typically used for construction. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

BHP Billiton, the world’s biggest mining company, said China’s steel production is slowing as the world’s fastest-growing major economy starts to shift to focus more on consumers than large building projects. Read more

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

Not quite 24 hours since China took the tarpaulin off the lowest growth targets since 2004, with an emphasis on consumption etc and woah, Credit Suisse’s Dong Tao has come over all epochal:

We believe the golden age of infrastructure investment is behind us now. The golden age of housing boom is behind us now. The golden age of export is behind us now. The golden age of policy stimulus is behind us now. Read more

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

An Indian government-backed group that won rights to mine Afghanistan’s biggest iron ore deposit has sought $7.8bn in state aid and loans to develop the venture, Bloomberg says, citing two people with direct knowledge of the plan. The Indian steel ministry is said to be backing the proposal by the Afghan Iron & Steel Consortium, which comprises seven companies led by state-owned Steel Authority of India (SAIL). The ministry will seek approvals from the foreign and finance ministries, they said, without giving a timeframe. The consortium was last month awarded the rights to mine three out of four blocks of Hajigak, a series of rugged mountain ridges 100km west of Kabul which hold an estimated 1.8bn tonnes of ore.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Earlier this week we looked at the rebound (of sorts) in China’s iron ore imports pricing from $120/tonne to almost $140/tonne, when much of the data was pointing to a deceleration in demand. At the same time, port stocks seemed to be building rapidly:

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Chinese steel mills have started to cut their production as tighter credit conditions and a cooling real estate market bite in the world’s biggest steel market, pushing the cost of iron ore to a 15-month low, the FT reports. The price of the iron ore in the spot market plummeted on Tuesday to the lowest level since July 2010, dropping a hefty 7.2 per cent – the biggest one-day drop in more than 26 months – to $128.50 a tonne, according to pricing agency Platts. Iron ore prices have fallen more than 30 per cent over the last six weeks. The rapid drop has opened a huge gap between spot prices and quarterly contracts, pushing Chinese steelmakers to demand a renegotiation of contracts. Traders said that some steelmakers were threatening to walk away from their contracts if miners refused to accept lower prices for October-December.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

As their chief executives gather in Paris on Monday for the annual meetings of the World Steel Association, the steel industry is bracing for falling prices as buyers delay orders because of nervousness about global economic weakness, says the FT. Behind the gloom are worries about the build-up of government debt in the US and Europe, coupled with the sense that the eurozone crisis could be about to worsen in the wake of a default by Greece.
There are concerns about Chinese demand too as inflationary pressures have forced Beijing into cutting back on the supply of credit, slowing the growth of steel consumption in China. The country has been the chief locomotive in driving up the expansion of the global industry. The composite share price of all the world’s listed steel makers has underperformed global stock markets by 30 per cent this year, and a survey for the FT by six industry experts suggests growth in world steel shipments is set to slow to 4.9 per cent next year after a likely 6.6 per cent this year.

China is underreporting the amount of steel it makes by about 40m tonnes a year – roughly the amount made by Germany – according to a new analysis that provides insights into the recent high prices for the main raw material used by the world steel industry, the FT reports. Detective work by Meps, a UK steel consultancy, indicates that Chinese steel output last year was 672m tonnes – nearly half of the world output – as opposed to the 627m tonnes reported by the Chinese authorities. Behind the underreporting, according to Peter Fish, Meps managing director, is that plants that Beijing would like to shut down because they are not economical and produce too much pollution have stayed open to meet local demand. Regional data-gathering bodies around China have disguised the fact the mills are still churning out metal by declaring that output is lower than is the case. According to Mr Fish’s analysis, the higher-than-reported steel production creates extra demand for iron ore – the main constituent of steel – and has been one factor keeping prices of the commodity at unprecedented highs, eating into steelmakers’ profit margins globally.

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

China is underreporting the amount of steel it makes by about 40m tonnes a year – roughly the amount made by Germany, the FT says. Detective work by Meps, a UK steel consultancy, indicates that Chinese steel output last year was 672m tonnes – nearly half of the world output – as opposed to the 627m tonnes reported by the Chinese authorities. The underreporting has been corroborated by several industry participants, including one of the three big global iron ore producers, and provides insights into the recent high prices for the main raw material used by the world steel industry.